Health Plans and Marijuana: What to Know Now

President Joe Biden is expected to sign a medical marijuana research bill that could eventually have an impact on health plan coverage of medical marijuana.

On November 16, the U.S. Senate passed Medical Marijuana and Cannabidiol Research Act, which was passed by the House of Representatives in July. News reports have predicted that Biden will sign the bill. The bill doesn’t specifically address health plan coverage of medical marijuana, but the processes it sets in motion could lead to greater clarity on the issue. At the time of this writing, it was unclear when Biden might sign the bill.

According to a press release from U.S. Senator Dianne Feinstein : “The goal of the Medical Marijuana and Cannabidiol Research Expansion Act is to ensure that research on CBD and other potentially beneficial marijuana-derived substances is based on sound science while also reducing regulatory barriers associated with conducting research on marijuana.”

In an emailed comment, attorney Elizabeth Engert Manzo, who recently co-authored a Benefits Magazine article on health plan and employment considerations surrounding marijuana, explains that this bill would make it easier for researchers to study cannabis, to identify barriers to research and to determine how different strains of cannabis could be made available for medical research purposes. Among other provisions, this research bill would require a report to Congress within one year of enactment on “the potential therapeutic effects of cannabidiol or marijuana on serious medical conditions.”

The passage of the bill follows other marijuana-related developments this fall:

*In an October 6 statement, Biden asked the Secretary of Health and Human Services and Secretary of Labor to initiate the administrative process to review how marijuana is scheduled under federal law. In the same statement, Biden pardoned all prior federal offenses of simple possession of marijuana and urged state governors to also do so for state offenses.

*During the November elections, the number of states with legalized recreational marijuana increased from 19 to 21 with the passage of ballot initiatives in Missouri and Maryland.

Health Plan Coverage of Medical Marijuana

The growing patchwork of state laws that legalize medical and recreational marijuana have presented challenges for employers and health plan sponsors, Manzo and attorney Louise F. Pongracz write in their article, “The Complex Marijuana Issue: Employment Considerations and Health Plan Coverage Concerns,” which appears in the September/October issue of Benefits Magazine.

“As more states authorize medical marijuana programs, health plan sponsors face the complex question of whether their plans can cover its costs,” they note.

Marijuana is a Schedule I substance under the federal Controlled Substances Act (CSA) of 1970, which makes it illegal to possess, sell, give away or grow, the authors explain. Despite the proliferation of medical marijuana programs in many states, under federal law, there is “no currently accepted medical use.”

In addition to the states and territories that have legalized some type of nonmedical/recreational cannabis program, 38 states, the District of Columbia, and three other U.S. territories have some type of approved medical marijuana/low tetrahydrocannabinol (THC) program.

The authors explain that health plans have not covered medical marijuana even if it is legal in their state because they don’t want to jeopardize their tax-exempt status or risk a fiduciary violation under the Employee Retirement Income Security Act (ERISA).

Most health plans are voluntary employee beneficiary associations (VEBAs), which are exempt from federal taxation requirements under Internal Revenue Code (IRC) Section 501(c)(9). However, the IRS has not provided clear guidance on whether a VEBA can cover marijuana as a benefit. Because of the lack of clarity, covering medical marijuana could be considered a breach of fiduciary duty under ERISA.

This breach of fiduciary duty could come from failure to follow plan documents under ERISA Section 404(a)(1)(D). Most health plans include exclusions for claims related to illegal drugs, and most prescription drug benefit plans state that medications will only be provided consistent with Food and Drug Administration (FDA) approval and guidelines. “If a plan has documents containing such provisions, trustees would be wise to decline covering medical marijuana as a benefit,” the authors write.

Medical necessity is another factor in the consideration for covering medical marijuana, the authors note. Employee welfare benefit plans provide treatment, services and medications only for things that are “medically necessary.” “For marijuana to be medically necessary, more will be required than simply moving it from the CSA Schedule I to Schedule III. Prescribers and providers will also need to be able to demonstrate that medical marijuana is ‘needed to diagnose or treat an illness, injury, condition, disease or its symptoms’ and that its use ‘meets accepted standards of medicine’ a key term in most health plans’ definitions of medically necessary,” the article states.

What Happens Next?

Medical Marijuana and Cannabidiol Research Expansion Act 

If the report that is requested in the bill determines that cannabidiol or marijuana does have therapeutic effects on serious medical conditions, that may provide a path for FDA approval of such medications, which could open the door to health plan coverage at some point in the future, Manzo said.

Schedule Status of Marijuana

According to Politico, after the heads of HHS and DOL start the schedule review process ordered by Biden, it is delegated to the Drug Enforcement Agency (DEA) and FDA. If those agencies decide that the status of marijuana should be changed, they could either move it to a different schedule or remove it from CSA.

Moving marijuana to a lower tier on the CSA would allow it to be prescribed by doctors, a Reuters article reports. The article states: “If it became a Schedule II drug, like most opioids used for pain management, those prescriptions would still be tightly controlled by the Drug Enforcement Administration. If it were moved to Schedule V—the lowest tier—it would be minimally controlled, like cough syrups containing small amounts of codeine.”

Stay Tuned

Kathy Bergstrom, CEBS
Senior Editor, Publications at the International Foundation of Employee Benefit Plans

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